USX - Earnings call transcript Q4 2018 | U.S. Xpress Enterprises Inc

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Operator

Ladies and gentlemen, greetings, and welcome to the U.S. Xpress Fourth Quarter and Full Year 2018 Earnings Conference Call. [Operator Instructions] As a reminder, this program is being recorded. It is now my pleasure to introduce your host, Brian Baubach, Senior Vice President of Corporate Finance. Thank you.

begin. may You

Brian Baubach

Officer; and in operator, me everyone. appreciate Chief We today Officer. Chief Thank fourth good quarter participation Executive and President our Eric With Eric XXXX your Peterson, are Financial you, Fuller, afternoon, and earnings here call.

section a We've Investors also today's supplemental to our a posted on reminder, will discussion available February complement website of a replay As website at on call through this be the of XXXX. investor.usxpress.com. our XX, presentation

me other let in certain that differ forward-looking within and XX, Private prospectus, begin, such such statements. to XXXX, actual results and Before about that duty contain plans, to beliefs, the of everyone, those or the factors future uncertainties we call may forward-looking other Act estimates, our subject not remarks a we and remind, statements variety forth this and update statements. of do These Reform cause factors are that implied to statements include prospects. indicated could of set final Securities expectations, Such by are undertake from XXXX. Such any materially June risks, dated constitute Litigation meaning statements risks

most to I'll to release. accordance over results GAAP earnings turn the measures which in with Additionally, can prepared of substitute our for will certain comparable during Fuller. call non-GAAP isolation be reconciliation U.S. we Eric the a A as should in in or additional discuss point, in today's not useful believe these information performance. measure GAAP. this At non-GAAP call, be this measures, can presentation we evaluating our found The be considered of

Eric Fuller

then quarter results have I'd and good afternoon, of proud like quarter XXXX strategic fourth reviewing start the full initiatives conclude opening results upon our that achieved we with Thank fourth a market questions. and of more progress call I'm for will fourth then our our the review results. to financial Eric discuss you, detail Brian, and our outlook. Peterson by executing everybody. our in and before quarter year

adjusted For quarter, basis XXX points our the improved fourth operating year-over-year XX.X%. to ratio

quarter delivered quarter's and best have years. represents OR of in we adjusted sixth This the XX ratio operating the that performance is consecutive improvement

the truck offering. been utilization earnings. capital manage and an core positive metrics, work was results, and the success our including year history ratio focus momentum team our our Our early to XXXX business delivers best our structure We as measure has in improved company's with record by adjusted to count, we that rate, cost. by our year initial public from increase June financial operating

well positioned are industry-leading to improve our We target profitability. manage methodically and our allocation, continue operational execution capital to

approximately average X.X% per our level X.X% year. to division, in average Turning in in revenue fewer a as increased decrease our teams of to the per compared mile, in In increase our per partially utilization highlights. miles reduction the primarily tractor. offset result was by quarter prior in a fourth X%, a average This fourth over segment of quarter road revenue per week the result a an tractor the

driver-centric sequential retention them offering the drivers remained miles, drivers initiatives as in to equipment and attractive While continue market modern for professional by on focused see we and challenging, our hiring team. execute our we a improvement operations

first increase has first through weeks momentum to through small division contributed having improved the the to to driver As and persist This pay. continued this a into first the we improvement as quarter. we the quarter without count in the incremental result, year, which X our of quarter truck third are expect the OTR momentum quarter from seeing our

primarily quarter per surcharges, of quarter of a to fourth week, was revenue a XXXX compared The result division. increased Turning XX% of to fourth increase mile. per per increase in as dedicated revenue the division's the average tractor in the fuel excluding XXXX. X.X% This our

tractor miles compared X%, pleased revenue to with seasonal was division's fourth as quarter a of per typical quarter on basis due as very are decline this holidays. our performance the We essentially primarily to week approximately the quarter sequential the constant from per third a

Additionally, the this third performance quarter is decline we improvement the XXXX of a XX% utilization that and in decline marked the experienced X% from in quarter. second the

as shipping the certain changes in of implemented patterns. account utilization have address direct shipping improved and not Our expected. this patterns, address to increased have rates this To adjusted we the issue, change quarter performed have of result we that had which we is to

largely been has expect into now not it do Taken to the persist together, addressed, and we issue XXXX.

increased Lastly, fourth yield, the compared fuel $XX.X result in revenue higher was to in a This load X.X% our in customers. on optimized to Brokerage increase fourth and a XXXX. quarter which $XX.X of continues to to XX.X% as per The million partly while count higher the to solutions more offering million same load quarter the basis, for at prices. the attributable revenues primarily segment time assets XXXX provide capacity our segment additional selectivity was Brokerage of

to over January. look profitability. expect comps our and a designed difficult. become minutes performed to to to of initiatives our this a more roles which an Since XXXX, like ahead, the in operations, exit rate identified we have operations as our At of in we few the series U.S.-Mexico of extensive we point, improve I review announced we spend slow As taking continue growth company's our reviewing would to decision

personnel mile revenue network U.S. we business. this high U.S. require created fixed because and the and investment in also U.S.-Mexico evaluated assets freight As per the that a operations, our and meet efficiencies and level this, revenue maximize did of including in concluded these or the service the operations our of investment from We priorities. our investments to south Laredo lane unit of comparatively other part per planning of serving not in to border required aggregate in border,

and U.S. failed allocated in company's operations and to Dedicated keep Mexico U.S. operations. improvements with combined the XXXX, truckload pace During OTR the

return unique level market a scope the had a required achieved high despite the subsidiary adequate an to for or shareholders our fixed that model which of drive investment, never Additionally, necessary backdrop. scale

As a a detail strategic the industry-leading more transformation evaluate to reflects to cost the financial methodically step capital Eric the cross-border support exit improve This our a profitability. the model as freight latest we we allocation, decision transitioned execution company's Peterson target our moment. result, more with in review implications in of were Mexico. will and in operational variable

focus optimization. on retention utilization work we to yields improving and load-by-load basis initiatives on to and continue around We our existing continue a as driver on

will digital load matching, will focus drivers' load our including ultimate continue working into head we a acceptance the have our lifestyle, improve XXXX, of As we frictionless to prioritization automated goal order. and technology, and on which towards

have renewals Conditions XX% truckload to our through first into quarter to X%. for XXXX, market quarter rate remained of Turning constructive and agreed approximately the the of anticipated XXXX. revenue Since approximately and average contractually our rate the fourth an of with November, outlook. for we've increase

moderated While believe rate rates contract to increases current year X% X%. will we full have increase slightly,

our to XXXX. outlook expect we ability remain Eric results. to for continue and to of turn call a Additionally, over our improvement the seasonality the margin like normal drive to the would financial Peterson for for now review I through quarter optimistic and business first on

Eric Peterson

and Eric, afternoon. you, good Thank

the are results of quarter of in initiatives. benefits XXXX. to profitability million continued further of primarily the compared is our for the revenue quarter I'm $XX.X a to fourth Eric opportunity discussed, significant to million, per increase XXXX a fourth few result our profitability in look in ahead record increase for adjusted Total We increase of for The our rate $XX.X million summarizing prospects we revenues As was and million there $XXX.X and quarter. fourth spend increased the to XX.X% announce net the brokerage the realizing revenues. to a pleased the forward income a a for fuel quarter improvement. believe of and going surcharge $X.X increase by mile, X.X% to minutes

$XX.X impact to the quarter. $XXX.X increased million revenue compared income quarter an surcharges, the quarter X.X% in $XX.X fuel of of compared XXXX was increase million, fourth of million Excluding the of the to million the $XX.X for fourth XXXX. year-ago quarter Operating fourth achieved to

in loss cross-border the investment million fourth related cost and the $X.X to XX% to the sale increased the of fixed exit of XXXX, million our XXXX to fuel $XX.X our million operations of fourth purchase quarter operating quarter commitments unfavorable the adjusted million of XXXX quarter Excluding fourth in income $XX.X the year in compared quarter. for in prior and Mexico $XX.X on the

improvement quarter, the a ratio representing point of basis quarter to XXX operating XXXX. was the compared fourth XX.X% adjusted Our for

prior year million, XXXX. $X.X the quarter to prior a we favorably compared the ratio Adjusted For achieved fourth income of compared net adjusted in income improvement basis compares was $XXX,XXX XX.X% the to was XXX $XX.X in Net quarter. delivering point $X.X which million year the a full quarter million to the fourth for operating XXXX in quarter. year, the

an certain as amount investment The allocation an States. perspective. associated and eliminate In earnings, believe both income, our revenue prior our $X.X addition of exit to adjusted for $X.XX the customer we the from and lower a From in and cross-border in our resulting U.S.-Mexico record adjusted interest Mexico capital of per quarter win, the expense the fourth XXXX. operating compared earnings year, as a operations will earnings fixed to share quarter win, same be expenses perspective, well win will United million in of was We cost of cross-border

with exit eliminate trailers, first given income million receive approximately quarter, By quarters to to X expect over age. incur have an replace third From over small faster and of the X annualized also to approximately the X.X expect negative to benefit. years, had we $XX trailers expect expenses. impact a would The a we XXXX over the as next we operating a capital decline years impact and net million perspective, will which thereafter XXX in their than million approximately $XX build $XX revenue new proceeds of will neutral

deployed result, increase beyond. our capital we next income and a expect with less over to As the year

we lanes the cross-border to an our capacity offer customers continue and additional asset-like coverage within through Finally, will U.S. core access both alternative.

rate the between tax to in XX% cash pretax XX% with low year the the effective Excluding of was we digits. and our our the tax our single rate tax full adjustments quarter XXXX the impact be anticipate rate for the approximately to and for effective income, XX%

Turning to our fleet.

are equipment with we replacement net approximately spend leased for million replacing $XXX and that tractors tractors strategy, with to related converting We to mile to manage and million a of CapEx to owned. total execute leased XXX,XXX continue a will $XXX $XX to owned our our million XXXX approximately of portion cycle, in to the

in to of a expect we approximately ago, XX tractor As normalized million the cycle, to net our due availability large is months fleet figure, expect cash above XXXX. CapEx ended of and had more our period, levels company net When is reduce XXXX. purchase and free we under with levels we $XXX over $XXX.X more age X as revert a cash average of fuel-efficient which to our $XXX.X a thinking In our and revolving to to X-year approximately years regards exit year million the months flow, normalized a result approximately replacement XXXX from credit normalized of XXXX leverage, CapEx to million, tractors XX debt and of we net of a facility.

We approximate $XX full XXXX. for expense the to expect interest year million of

adjusted a Looking to our each XXXX, ratio to quarter operating on continue improve to expect basis. year-over-year we

believe tractors; have however, significant lower claims expense our this insurance of result recorders a the have financial and we installation of event we to to recent expected, seen not impact a an as opportunity continues. continue initiative meaningfully our in as we As

we believe we mature. continue and retention utilization Additionally, our opportunities initiatives driver-centric as existing to have around

adjusted concluding that, With target operating We ratio goal call turn for to to remarks. continue a the I'd XXXX. to Fuller for back XX% of a Eric like delivering

Eric Fuller

Eric. Thank you,

managing As we an initiatives including were in set business count, metrics, core we and that of with on by a developed the have rate, cost. have truck strategic place discussed, emphasis utilization

these initiatives We have and improve designed our implemented improve and metrics to core to profitability. to continue

Thank to the for to you, optimal again, open questions. to do we call time our left for much drive in your over goal continue Operator, please have and time. today. order performance While achieve progress, work make we

Operator

[Operator question first the from Instructions] Scott Group from Wolfe line Our comes of Research.

Rob Salmon

the this granularity gross this contemplated on you Salmon, the Truckload Rob roughly question And XX% Or OR. a more a of of Can or on it's Eric, clarification bit on a wholly just It's net not for Scott. is a consolidated basis? whether if segment? is with provide little or guidance fuel?

Eric Peterson

it's Rob, consolidated, is and of fuel. net It

Rob Salmon

comps of you color how was And a hoping gave some throughout, terms you could in as of I XXXX. we pricing guys the compare us beginning in that's on us the the nice of Kind give guys of November pricing sense course of progress the scaled over year? the on to first bids? X% realized have the how since the you that XX%

Eric Peterson

go believe term. Sure. in at we into As will I bit mean, little rate do kind 'XX, a of we that, the moderate least that near

that And in so the if look bids seeing, that in bit at a are are little coming we now. coming the rates, are you probably below at X%

on so that still and a our that land we And but improvement from the lot very X% front-end, strong in land in a perspective that of rate, will X%. comfortable that, was still basis overall on a year-over-year to will see feel a contract rate we

Rob Salmon

comps decelerates the blended tough off built Road the per you of fourth the as loaded went frankly, Over Eric, the in kind rate we saw that, further truckload shouldn't that in 'XX And that on the year, the, some Why half quarter, of about in mile. along? pretty segment, X% first guys think of

Eric Peterson

Yes.

mind, in keep talking we're rates. So contract

your the is increases versus spot affected which by exposure So rate, overall contract to blended market. our

half spot 'XX is down the quarter our where the were substantially again, Now from have 'XX. first and in of they XX%. managed into rates exposure, even spot But of come market third market that to

some seen will in have area, which we model. impact overall so that moderation And the

an think still blended be we market to spot rate continue going rates strong, So impact that rate. that be will contract is overall the to to but

Rob Salmon

a data could the half And just we've of back the of weaker the guess, when low we dip negative when I kind your year? X when we of about actually Or think think the I I they should positive of throughout? as of, contemplate rates in that less Do there is the teams, consolidated well risk we seeing of guess, just mix things? impact how you we of remain a the in kind those that the as combine board been spot impact

Eric Peterson

continue market year, will think strong spot see back to by to to year-over-year some confident be comps. will and they're the market feel We versus rates strong I we quarter, going to to entire We up. throughout quarter rates come think actually that we'll No. continue positive. for the that see continue 'XX, start And be

Operator

the of line Delco Our from next question comes Brad from Stephens.

Brad Delco

equipment you where and be say, will that have leverage. a have apologize you this. think some target us little it your, you Can sounds Mr. like right, you color Peterson, I replacing be that? you owned. with bit provided if I $XX what said, target, on just a CapEx of will on on and with higher, Is Do you you that you said you'll be leased will Do some said a million? just remind us

Eric Fuller

exactly that's right. Yes,

conversion at lease If just million guidance $XX is look own. that that we of the you a of gave, number to

comparing the of CapEx don't books benefit have when net run depreciation to my that I on you're depreciation rate. So the now

back reason my equipment. And you this a If compare in out it's just cycling against new the that little higher. it it's to depreciation, it's higher,

requirements, with ahead we to by out this drop exit makes and we to an XXXX tractors. used this XX cycle are of age so strategy at don't 'XX this market out as of is XX any think of condition average fleet deterioration the we're there, the enter new equipment CapEx an for sense go months. old sense age equipment used months with You'll required looking much when the Right stable purchasing those average our lower market. We older us makes now, see approximately see our XXXX years. when we much and We the as and think we XX-month in

Brad Delco

from like, that's $X to about but get, the assets. your Okay. from seems benefits million for Mexican earlier you're guidance, exiting these sounds XX% it year, the And it then of unchanged going OR like target

so is the offsetting there second first is the an of make the the out get Just assuming we'll should that? sure benefit anything and associated basis, the be of assets in on some those you from expenses exit backing XX% quarter? I'm with that, Or adjusted

Eric Fuller

to disclosed or That's transition, What to quarter. transaction done million that that that as that could we have the fourth getting start is benefit potentially of the we up in we release this initial expenses third expect and we in on then correct. I'll quarter third and incur during the start $X

Eric Peterson

margins. be freight that Brad, things then the could freight from on phase the out you in and be Mexican a And domestic to a that from little of operation. slight more as there'll a operation could of process in I lag phase bit bit little a need of affect lag a There

Brad Delco

And meeting XXX 'XX? Okay. will consistent Do you think of on feel of throughout weighted but that Do you year? on front be just not half suggest momentum XXX, more improvement. let's say, it OR more quarterly basis rate that like the the towards a be guidance, be then to exact. now, will points based pretty XX% about

Eric Fuller

seasonality, to that's normal Yes. with if something I'm looking When you our at back look the XXXX, that's model. probably more

at is different that's some per down -- per the XXXX. million volatility I line think insurance quarters, look were an XXXX program happened where -- could the $X general of and the at in occurrence, annualized we at $XX have what When saw million basis. could happens have significant you what item in for quarter XX.X%, potential great create occurrence year. $X and but that we million the some up a for claim progress our line XX.X% made we But that at eliminated line a why still we to we is first we changing on look I and during ended in claim the XXXX,

is quarter year. quarter Our the of first usually the lowest

I battle next quarters back year second. the fourth the best one and and the the quarter forth the is usually it's of and it's the third supremacy. for year quarter mean, second Our third, year

Brad Delco

and I I'm you to question change greater the improvement of the of half actual But in see I'm is, of in the or half in first -- improvement trying XX%, terms the to less asking may your margin that Or margin see your back in figure cadence against potentially of improvement? year margin out of the deterioration of guess, half first 'XX? think you'll get to be rate the 'XX? do margins

Eric Peterson

think consistent quarters. to through it's I going Brad, be

Brad Delco

queue. I’ll I Okay. back in get it. guys. Thanks, appreciate

Operator

Merrill next from Hoexter of Our from Instructions] Ken question [Operator the line comes Lynch.

are You live. now

Ken Hoexter

what a utilization? Eric turnover, when driver on just target? the into talk that I tractor it to could of you guess, or target, focus to it talked simply operating Peterson, you engaging more, what gains efficiency about Is the is just ratio be? I into targets? how Or about And you delve much guess, want just a bit flowed you've the rates? just including XX% the little programs I your potential are understand that that upside through

Eric Peterson

some back that'll lead mean, lead put think even to that some and 'XX. get of our in improvement we as counts to we we half some truck -- in We think that some wins. start continue initiatives We've and continue, year seen the place overall marginal improvements further to our will in 'XX continue think I improvement into the count. fruit last driver overall decent in our to small in bear our we turnover That will that will XXXX. truck to into small Sure.

traction we that think utilization start getting our also We in can metrics. some

we Dedicated. some we're overall So team that OTR, improvement will momentum in in can bit getting seeing our improvement in some obviously, utilization piece good a think continue, of there and had We we to we think but revenue. start headwind and will from improvement a lead that little some the

our costs in insurance be that of And will going that start number we accident this piece see improvement impactful lead rates, into We we've think to to to I to this lead what and call year. related seen the that's mentioned, some insurance the kind On think to we related will event we is this of we believe think forward-looking going as measures that's well. an as lower that recorders. side, our some Eric that already to year in the cost

Ken Hoexter

mostly just the as operations insurance flow can side improved see so And well? I or on the through

Eric Peterson

everything. it's Yes, I think,

it's operation. think, improved I

I utilization improved and revenue think count. with the it's truck

lower cost better with better headcount. reduced on of trying than in managing interest so the item, a cost line in turnover there. moving also come line but it's lot our think have items. lot cost we we that a return And direction in the, will with to I the confident right head we we're count and cost We're of over we items reduced down, different with feel that ever coming down line different see as get

Ken Hoexter

is have the what quantified before? versus turnover of you And level now

Eric Peterson

That's that that our initiatives we some momentum necessarily 'XX that, XXXX, we started will a think but we think seeing related, drivers, turnover. release, with we are level not than feel more end and roll improvement we we 'XX we that. decent continue as into around and do, to on confident continue driver out We something at better we'll

Ken Hoexter

some given are a that be kind built-in utilization pay? on. changes? how different ultimately, a And rate driver the the more in focused what the as Okay. can is you do back XX% into about take mean how the to Can rates talked And may year that, that was much I on you you terms May up? as step OR? kind end you of programs, on think of so lot raise be need last did about increases you quantify of something at peers we

Eric Fuller

Yes.

really how per at those I look aggregate. driver our modeling wage mile Ken, our we're purposes, the mile think, operators, at at mile per for cost as per our X yes, we looking in rate cost away and

we'll the So wages, we to rate get it generally, supply in And that rate. essentially really on cover the there'll wages driver on pressure means side. constraint pressure get recover challenge that be and in the extent we than on a to more

has don't to the risk in of type performed. line of lot aggregate those a So traditionally items X that I see market because

Ken Hoexter

mix rates. the was one Dedicated? on just X% that Okay. between the gave other? Or And that to segment there? understand or mix more Was you that want just focused X% what the a the Road on Over for me on lastly, and outlook I to

Eric Fuller

We be for No. truckload. to feel X% truckload. that's that's contract that full rates, Again but that all said and year. we'll full it's within the when done, That's X% range

Operator

we -- gentlemen, my Ladies have and apologies. no

next of question the Stifel. from from Our comes Remey Austin line

Austin Remey

you Can guys me? hear

Eric Peterson

can. We

Austin Remey

guys terms percentage Road and in Okay. in When your between mix segment of what's of Dedicated, longer-term think you goal? revenue your the business total Trucking about Over

Eric Peterson

float goal but in to long-term something as be will our level. XX%. in this to of goal that We conditions to our that closer prudent XX% a level getting but long-term area that that be up So also to good Not both definitely focus that's an year, slower be on that done over, times, will is economic well. to think that's kind

So that's to where trying we're to. manage

Operator

Our Wolfe comes Group from next Research. of line Scott question from the

Scott Group

quite happened? the in you're that weather we that Obviously, of I curious to a kind if get week, your customer demand? you was saw seeing harsh if blip more of Or to continue of this bit your was last kind perspective weather-type of through a follow Midwest in think

Eric Peterson

up a that are Yes. of of we while. I for tighten weather things seeing, magnitude, mean, little kind will typically,

a so better up, overall And we market the term. think some it positive going months us are have to to took demand and of is into do bit little from some pin-up but the that near be for demand that it's market situation I in on a it that I weeks. XXXX a spot think where vortex, clean could polar couple impact don't leading seeing

Scott Group

confident obviously, we did quarter. you tough internal of that is in within you is think the about utilization fleet, are constrained you here? follow-up utilization we think going helpful. is How another tougher I can be And XXXX? see think the bit guys And to you is, called just you grow out turnover? should comps. truckload in opportunities the reducing Or some given lapping out perspective the that mix look opportunities that a something still utilization Eric, we and, Are

Eric Peterson

Yes.

so Dedicated. the to think, it to will momentum that we of reap X utilization we at the We continue see specifically, good with look breaking as our improvements, Dedicated in customer on, segments. benefits one if So continue up the you in think some full we so

is So we there. do still there think improvement that some

mix than really On as teams what mentioned we it we the last Road Over the have side, to on is side, year. less the related

we We we're issue, back, give team We're build bit going little are but dealing if can with back we that. do think to I still see back headwinds have address. get into and we can but and we currently but trying of on team can wins that in fleet year. a can get some of OTR something the overnight, fix the to can It's back the mix to half see into build not in well. 'XX fleet it's to as get as the as start unfortunately, are utilization trying just, you half that better again some we think then we our we track, back But of we latter that

Operator

no time. to turn in this have floor queue I'd we like and questions for management to closing over you. Thank the at further Ladies back gentlemen, comments.

Eric Fuller

you. in We couple All doing And this joining everybody Thank of appreciate Great. we us. a to look again right. forward months.

Operator

conclude you, teleconference ladies Thank gentlemen. and today. for our This does

for participation, your and day. now this you Thank disconnect line have wonderful a You at time. may your

U.S. Xpress Enterprises (USX) 8 Feb 192018 Q4 Earnings call transcript